The Dispute Resolution Review: Netherlands
Introduction to the dispute resolution framework
The Dutch judiciary comprises 11 district courts, four courts of appeal and the Supreme Court. District courts have jurisdiction over most civil matters in first instance. Parties can appeal from most district court decisions to the courts of appeal, which can review the case de novo, limited only by the grounds of appeal. In certain cases, parties cannot apply to the district court but must apply to the court of appeal, for example to set aside an arbitral award. The Supreme Court is the highest court and does not adjudicate issues of fact. The Supreme Court also has special competence to decide on lower courts' preliminary questions of law.
Most cases in first instance are decided by a single judge, but more complex cases are dealt with by three judges. The Dutch judiciary consists mostly of trained judges and, to some extent, former practitioners. It is renowned for its competence, integrity, independence and impartiality. The Dutch court system does not feature any juries; nor does it provide for any discovery or disclosure phase prior to initiation of the proceedings on the merits.
Specialised divisions of the courts deal with specific types of disputes. Most corporate disputes are handled by the Enterprise Chamber of the Amsterdam Court of Appeal (e.g., inquiry proceedings and squeeze-out proceedings). The district and appeal courts in The Hague have exclusive competence to deal with certain patent and trademark cases. The Amsterdam Court of Appeal has exclusive jurisdiction to declare collective action settlements binding. The Netherlands Commercial Court (NCC), a specialised chamber of the Amsterdam District Court and Amsterdam Court of Appeal, deals with international disputes. If parties choose to litigate before the NCC, the proceedings will, where possible, be tailored to the parties' preferences and take place in English. The NCC rulings are then issued in English.
The Netherlands has a long and stable tradition as a venue for international arbitration for both commercial arbitration and investor–state and state-to-state arbitration (The Hague, where the Permanent Court of Arbitration has its seat, often being a venue of choice). Legislation and case law repeatedly reiterate the policy of supporting arbitration. The Arbitration Act is part of the Dutch Code of Civil Procedure (DCCP) and is modelled on the UNCITRAL Model Law.
Mediation is frequently used to resolve disputes as well, although not as frequently as in the United States or the United Kingdom. In keeping with its voluntary nature, there are very few mandatory rules that apply to mediations conducted in the Netherlands.
The year in review
After having affected dispute resolution considerably in 2020, the effects of the covid-19 pandemic on court practice lessened in 2021. Courts often held hearings in a partially physical and partially virtual form, allowing mixed hearings with judges and attorneys present in the courtroom, while some or all parties participated via video. In view of the requirement that hearings are public, measures were adopted to allow for public attendance. Individuals wishing to attend public hearings could seek permission beforehand to attend physically or virtually, with the court ultimately deciding on the most suitable means of attendance. When eventually social distancing measures were lifted, most hearings continued with ordinary physical attendance, although courts typically continued to allow for virtual attendance when lawyers or parties could not attend due to covid-related measures.
In the past year, Dutch courts have again handled numerous, high-stakes, arbitration-related proceedings (setting aside and enforcement proceedings), a trend for some years now. This is largely due to the Netherlands being recognised as a suitable and neutral seat for commercial and investor–state arbitrations. In addition, the Netherlands is the seat of holding companies for many of the world's largest corporates and several foreign state-owned enterprises. This makes the Netherlands an attractive venue for enforcement proceedings, particularly in view of the robust legal framework for freezing shares and assets.
Class actions continue to be an area of Dutch law that draw international attention. The Netherlands has proved to be an attractive jurisdiction for offering opportunities for collective actions, and that appeal has grown further through the introduction of the Act on the disposition of collective compensation claims in a collective action (WAMCA) in January 2020. Between 1 January 2020 and 14 October 2021, 38 collective actions (excluding summary proceedings) have been filed, and 22 cases thereof have already been filed within just the past year. Collective actions, and the WAMCA in particular, are further discussed in Section III.
i Overview of court procedure
The DCCP contains most civil procedure rules, although several important procedural rules have been developed or further defined in case law. The courts' procedural regulations set out rules and guidelines of a more practical nature (e.g., rules for filing submissions, deadlines and extensions).
A Dutch court may only base its decision on facts or rights that are undisputed by the parties, or that are proven during the proceedings. Statements made by a party that are not sufficiently disputed by the other party will be considered as undisputed facts. In general, the burden of proof will be on the party that invokes the legal consequences of the facts or rights alleged by it. Evidence may be presented by all possible means and the court is generally free to assess the evidence introduced by the parties.
Historically, civil proceedings in the Netherlands have been focused on documentary evidence rather than on the presenting of evidence during a hearing and witness examinations before the court. Today, there is still no discovery or disclosure phase at the onset of litigation; however, there is an increased emphasis on early case management by the court. In addition, the use of motions to seize evidence and motions for disclosure has proliferated.
Moreover, pretrial witness and expert hearings have always been important tools for gathering evidence. A party may request that the court hold a preliminary witness hearing concerning certain matters if proceedings on the merits have not yet been initiated, or if such proceedings are already pending. The reason for a preliminary witness hearing may be to preserve the testimony of a witness who might be unavailable at a later point; to preserve the quality of a testimony (memories tend to fade); or to probe the chances of a particular cause of action. Generally, a person who has been called as a witness must testify. The court itself will examine the witnesses. Parties as well as counsel may pose questions after the court has examined the witnesses, but there is no system of cross-examination. The procedure for expert hearings is similar.
ii Procedures and time frames
Under Dutch law, the standard procedure to initiate a claim is by serving a writ of summons on the opposing party. Once the writ has been served, it is sent to the court. The writ contains information about the parties; the claim and its legal grounds; evidence supporting the legal grounds, including witness evidence; the basis for the court's jurisdiction; and a rebuttal of any known defences against the claim. Subsequently, the court sets a time limit (usually six weeks) for the defendant to submit a statement of defence, including all defences, motions and counterclaims. After the statement of defence (or after the statement of defence in counterclaim, if a counterclaim is filed), the court usually orders the personal appearance of the parties in an attempt to gather more information or to reach a settlement. The court may also provide the parties, upon request, with the opportunity to plead the case during such hearing. Setting hearing dates usually takes at least several months after the last submission for a case on the merits, but hearing dates can be set more efficiently by reserving dates in advance (active and early case management). In a standard procedure, the hearing is followed by a final judgment or an interim judgment. An interim judgment may deal with a part of the claim or instruct a party to prove certain points and produce certain evidence. It generally takes between three and six months for the final judgment to be rendered. To reduce delays caused by a lack of capacity to hold hearings, new legislation entered into force on 1 January 2021 allowing courts to provide flexible assistance to one another when faced with the temporary inability to hold a hearing.
The completion of proceedings on the merits in a district court usually takes a year, but could take substantially longer depending on the procedural complexities, such as the number of submissions, motions and time limit extensions. The losing party will be ordered to reimburse the winning party for its court costs and legal fees. The order for reimbursement is not for actual costs, but for a fixed amount dependent only on the interest at stake and the complexity of the litigation. The fixed amount is usually a low percentage of the actual costs incurred by the winning party.
A party can lodge an appeal against a final judgment within three months of the date the judgment is issued (four weeks for summary judgment proceedings). The court of appeal may assess a case based on both the facts and the applicable law. Appeals to the Supreme Court can be brought within three months of the judgment on appeal. A Supreme Court appeal may only be based on the misapplication of the law or for non-compliance with essential procedural requirements. An appeal suspends the enforceability of the challenged judgment unless the judgment was declared provisionally enforceable.
Certain motions are expressly mentioned in the DCCP, such as motions to dismiss for lack of jurisdiction, motions to produce evidence, motions for security and motions to summon a third party to appear in proceedings (e.g., for indemnification). Parties may also lodge motions that have no specific basis in the DCCP. There are no general motions to dismiss a case for not stating sufficient facts to support the legal grounds, or for not meeting the statute of limitations or on any summary judgment basis. However, the court may decide, on its own initiative or at a party's request, to deal with certain issues first in the interests of procedural efficiency (e.g., it deals first with the defence that the claim is time-barred). Motions can be made by parties in the writ of summons or in a written statement, depending on the stage of the proceedings. Motions usually suspend a case on the merits.
Urgent or interim relief
A plaintiff may seek provisional measures against another party and do so by filing a claim with the summary proceedings section of the district court. The plaintiff has to demonstrate an urgent interest in obtaining such provisional measure. Designated procedural rules ensure that proceedings can quickly lead to a decision. Summary proceedings may be initiated regardless of whether proceedings on the merits have been or will be opened. The court hearing the main proceedings is not prejudiced by the summary judgment. Summary proceedings are initiated by serving a writ of summons. A hearing, normally supported by written briefs, can take place within a few days or a few weeks after service of the writ. The decision of the court is normally rendered one to two weeks after the hearing. As a result, the entire proceedings normally take only a few weeks. In exceptional circumstances, a decision may be obtained within a few days or even within a few hours.
Summary proceedings can be used in support of a wide variety of provisional measures. They are often used to order a party to act or stop acting in a certain way (usually reinforced by penalties), for example, to obtain an order forcing the defendant to resume performance of a contractual obligation or to obtain an injunction against the infringement of an intellectual property right. Summary proceedings may also be used to obtain payment when the obligation to pay is not in dispute (but the debtor simply cannot pay), or there is no reasonable defence against the claim for payment (there should be a high probability that the claim would be awarded in a case on the merits). Summary proceedings are popular and widely used, as they enable parties to quickly resolve their disputes. All injunctions are normally immediately enforceable, notwithstanding an appeal.
Pre-judgment attachments are an effective means to secure and preserve assets until the final resolution of a dispute. It prevents the debtor from frustrating recovery and ensures that, at the end of the proceedings, the attached assets are available to secure payment. Having substantial assets frozen may sometimes offer enough commercial leverage to settle the dispute. A pre-judgment attachment is made by first requesting the district court, ex parte, to grant leave for the pre-judgment attachment. This usually means that the claimant has to set out the reasons supporting the claim in a draft writ of summons. Any party who appears to have a justified claim may request a pre-judgment attachment and, in practice, this is nearly always granted. A debtor can object to an attachment in summary proceedings or in proceedings on the merits. If the attachment appears unjustified or the debtor provides sufficient security for the claim, the court will typically lift the attachment. The fact that assets are successfully located and frozen in the Netherlands may create jurisdiction for the district court in the location of the assets (unless there are other means to secure an enforceable title). A pre-judgment attachment on intellectual property rights is possible in cases of alleged infringement of intellectual property rights in order to preserve relevant evidence.
After assets are frozen, the party who has successfully done so must start litigation or arbitration proceedings on the merits within the period ordered by the court, unless court proceedings have been already initiated. If the claim is eventually rejected, the party who sought the attachment is liable for any damage caused by the attachment. However, if the claimant succeeds and obtains a final and enforceable judgment, then the pre-judgment attachment becomes an executory attachment, allowing the plaintiff to execute its claim against the assets of the defendant.
As of January 2017, a European cross-border pre-judgment attachment can also be used, based on the European account preservation order (EAPO).2 An EAPO can be executed within the EU without any special procedure or declaration of enforceability.
Inquiry proceedings are an effective, quick and relatively inexpensive tool for shareholders to address perceived mismanagement in a Dutch company. Proceedings are frequently looked to by shareholder activists who seek to influence the policy of a listed company. It is also typically the venue where takeover battles are adjudicated. The right of inquiry entitles shareholders (provided they meet statutory threshold requirements) to request the Enterprise Chamber of the Amsterdam Court of Appeal to investigate the affairs of a Dutch company. The Court will order an investigation if there are well-founded reasons to doubt the correctness of the policy or course of action of a company. The Enterprise Chamber can also order immediate temporary measures (e.g., a prohibition on taking certain actions, the suspension of directors, the appointment of a temporary director or supervisory director with exceptional powers, suspension of a corporate resolution, suspension of voting powers, change of authorities of the company's bodies or transfer of shares). Immediate relief requests are popular and may be very effective, and the Court often handles them before the inquiry request itself. If the Court has ordered an investigation and the investigators' report has been made, shareholders can request the Enterprise Chamber to determine that mismanagement has taken place and request definitive measures (e.g., dismissal of directors, suspension or annulment of a corporate resolution). The Enterprise Chamber does not deal with the liability of directors against the company or against shareholders. If mismanagement is established, shareholders usually file a civil liability claim in the district court to seek to obtain damages.
iii Class actions
The Netherlands is a well-known venue for class actions, which under Dutch law are more properly referenced as collective actions. Collective redress is increasingly used in various fields of law, such as consumer law, data protection law and competition law. Recent years have also seen an increase in collective actions related to climate change: they have nearly doubled since 2018 and pose a growing risk to businesses and governments.
In the first successful climate change case of Urgenda in 2019, the government was ordered to reduce emissions to protect the life and well-being of citizens in the Netherlands on the basis of human rights law.3 More recently, Milieudefensie (a Dutch environmental organisation), six other environmental organisations and 17,000 individual plaintiffs successfully brought a collective action against Royal Dutch Shell. In May 2021, the district court of The Hague ruled that Shell must reduce its CO2 emissions by 45 per cent by 2030.4
The Netherlands has proved to be an attractive jurisdiction in offering opportunities for collective actions, and that appeal has grown further by the introduction of the WAMCA on 1 January 2020, reshaping the Dutch collective actions regime by allowing monetary damages to be claimed in a collective action, while offering broader access to collective relief coupled with safeguards to prevent excesses and to facilitate finality.
The Act on collective action (WCA)7, introduced in 1994, allows non-profit organisations that meet certain criteria to file collective actions for injunctive or declaratory relief, but not for damages. The WAMCA8 is applicable to collective actions for all types of claims filed after 1 January 2020 in relation to events that occurred on or after 15 November 2016. The WAMCA introduces the possibility to claim damages in a collective action.
Before a claimant can start a collective action under the WAMCA, it has to make a reasonable attempt to settle the case with the other party. In the case of a settlement, parties may jointly request the Amsterdam Court of Appeal to declare the settlement binding. If a settlement is not reached, the claimant may file a writ of summons.
The WAMCA makes an express distinction between the preliminary admissibility phase and a substantive phase. A substantive hearing of the collective action will only take place after the court has assessed the preliminary issues, including that the claimant meets the admissibility requirements under the WAMCA; the collective action is more efficient and effective than bringing an individual claim; and it is not summarily apparent that the collective action is without merit. In addition, if more than one claim organisation has standing, the court appoints one claim organisation to act as principal in the proceedings as the 'exclusive representative'. As soon as the exclusive representative has been appointed, group members may opt out of the proceedings.
The court will stay the proceedings to give the exclusive representative and defendant the opportunity to settle the matter. If the parties reach a settlement, they are obliged to submit the settlement agreement to the court to have it declared binding. The judgment can be declared binding for Dutch residents, unless they opt out, and for non-Dutch residents, if they opt in. In addition to the opt-in requirement, non-Dutch residents should have a substantive connection to the Dutch jurisdiction to be part of the proceedings.
If no settlement is reached, the proceedings will move to the merits.
Collective actions can be filed by a foundation or association to protect similar interests of parties provided that it advances those interests in accordance with its articles of association. The WAMCA sets eligibility requirements for the claim organisations filing collective actions; for example, transparency regarding their funding, but also regarding the governance and representativeness of a claim organisation. This aims to further increase the efficiency and effectiveness of collective actions.
In collective action proceedings, the common basis for jurisdiction is typically the domicile of the defendant, or the place where the harmful event occurred. The Netherlands is a relatively liberal jurisdiction for allowing international collective actions in Dutch courts. Typically, a Dutch (holding) company as co-defendant is sufficient to create jurisdiction, as is illustrated by the Petrobas and Steinhoff cases.9 That the Netherlands is frequently used as a venue is further illustrated by the more recent Car Claim, LIBOR and Facebook judgments.10 These cases, too, illustrate how the Netherlands can be used as a venue for cross-border class actions by including Dutch companies as defendants or co-defendants. This is significant, as many multinationals use Dutch companies as holding or finance companies within their group, thus creating potential class action jurisdiction in the Netherlands.
The Collective Redress Directive (CRD)11 has entered into force and Member States must implement it in national legislation by 25 June 2023. On 1 May 2021, the Dutch legislator published an Implementation Act of the CRD for consultation. It is expected that the CRD will not substantially change the current legal system of the Netherlands, or its leading role as a venue for class actions, because the scope of the CRD is limited to consumers and to infringements of directives and regulations listed in Annex I of the CRD, whereas under the WAMCA a collective action can be initiated for any type of legal infringement.
In addition to collective actions, the Netherlands also offers a mechanism for settling collective cases if needed on a global scale. Collective settlements are settlements between a claim organisation representing interested parties, and the party that allegedly caused damage who agrees to compensate the class. Prior court litigation is not a prerequisite for such a settlement. At the joint request of the parties to a settlement agreement, the Amsterdam Court of Appeal can declare the settlement binding on all interested parties, unless they have opted out. The opt-out period is determined by the court, but is at least three months. The court will test, among other things, the reasonableness of the settlement; whether the claim organisation adequately represents the interested parties; and if the interested parties were properly notified and thus have had an opportunity to object and to opt out. Case law shows that in recent years the courts have thereby given increasing weight to the rules in the Claim Code, which is a code of conduct for claim organisations.
Collective settlements have mainly been used for securities and misrepresentation cases involving international investors. Well-known examples are Shell, Converium and Ageas.12 In Shell, the Amsterdam Court of Appeal took a rather broad approach in interpreting its jurisdiction by ruling that the settlement may also include foreign claimants, thereby allowing it to serve as a mechanism to resolve claims worldwide (together with a (preceding) US class action settlement). In Converium, this reach was further expanded, as there was even less connection with the Netherlands. In Ageas, a €1.3 billion settlement was reached with various claim organisations that represented former Fortis shareholders over losses incurred during the financial crisis.
iv Representation in proceedings
Representation by a lawyer admitted to the Dutch Bar Association is mandatory in Dutch civil litigation procedures. Parties to litigation before the cantonal division of the district court and defendants in summary proceedings are exempt from mandatory representation. The same rules apply to both natural and legal persons.
v Service out of the jurisdiction
The EU Service Regulation applies in the Netherlands.13 To serve a legal document on someone in another EU Member State, the sender submits the document to the Dutch transmitting agency. The agency will send the document to the receiving agency of the EU Member State. The receiving agency will, in turn, serve the document on the recipient. Furthermore, the Netherlands is a party to the Hague Service Convention, which applies to the service of judicial and extrajudicial documents in civil or commercial matters.14 Under this Convention, the sender can submit a legal document to the competent Dutch authority, which will then forward the document to the designated central authority in the other contracting state. The central authority ensures that the document is served on the recipient. Regarding the service of documents in EU Member States, the EU Regulation prevails over the Hague Service Convention. If neither the EU Service Regulation nor the Hague Service Convention applies, common service rules of the DCCP provide, for the most part, the same procedure as found under the Convention.
vi Enforcement of foreign judgments
Foreign judgments can be enforced in the Netherlands after being declared enforceable by a Dutch court in an exequatur procedure. However, no enforcement order is required for the enforcement of decisions concerning civil and commercial matters originating from EU Member States.15 If an enforcement order is required to enforce a foreign judgment, the Dutch court may recognise and essentially copy the foreign judgment, without reviewing it on the merits, if four conditions are met:
- the foreign court's jurisdiction was based on internationally and generally accepted grounds;
- due process was observed in the foreign proceedings;
- recognition does not violate Dutch public policy; and
- the judgment is not inconsistent with any other judgment capable of recognition in the Netherlands.16
Ground (c) of this test has increasingly become a ground for litigation on refusal of recognition and enforcement, particularly where the circumstances surrounding a foreign court's judgment are suspicious.17
vii Assistance to foreign courts
Courts within the EU can either request to take evidence directly in the Netherlands or request that a Dutch district court takes that evidence.18 In the latter case, a foreign court can approach the competent Dutch court directly. Another basis for assisting foreign courts is the Hague Evidence Convention, which provides that foreign judicial authorities may request the competent Dutch authority to obtain evidence or to perform some other judicial act.19 It also allows for the taking of evidence by foreign diplomatic or consular officials in the Netherlands. Requests for the purpose of obtaining pretrial discovery for use in proceedings in common law countries will be denied, however, as the Netherlands has declared, on the basis of Article 23 of the Hague Convention, that it will not execute letters of request issued for that purpose.
viii Access to court files
Dutch law does not allow for public access to court files. Court sessions are open to the public (apart from cases regarding family law or minors). Exceptional circumstances may lead to closed hearings – for example, for reasons of public policy or state security. A copy of a court decision (where the operative part has been declared in public) can be requested from the court, irrespective of whether the proceedings have ended or are ongoing. Many court decisions are published on the website of the judiciary,20 where party names are anonymised if they involve natural persons.
ix Litigation funding
In principle, third-party litigation funding is allowed under Dutch law. In recent years, there has been an increase in the use of third-party funding in Dutch collective actions. The Dutch Claim Code stipulates some principles regarding litigation funding. The Collective Damages Act imposes stricter financial requirements on the representative organisation filing a collective action to safeguard the interests of the injured parties and the responsible (defendant) parties. The representative organisation must not only be able to prove that it has sufficient means to bear the costs of initiating proceedings, but that it also has sufficient control over the collective action. The third-party funder must not have a decisive influence over the claims. Individual board members, as well as their lawyers and other service providers, should function independently from the external funders. Furthermore, board members of the representative organisation may not have a profit motive in the collective action that is realised through the organisation. Courts may examine whether the interests of the represented group may be adversely affected by the use of third-party financing.
Discussions on the proper reimbursement of litigation funders are particularly prevalent in mass claim settlements. For instance, in the Converium case,21 the Amsterdam Court of Appeal held that lawyers' fees amounting to 20 per cent of the total amount of the settlement were not unreasonable, also taking into account the standards developed in US case law on what is common and reasonable. According to professional rules of conduct, Dutch lawyers may not agree to a no-win, no-fee arrangement or similar arrangements.
i Conflicts of interest and Chinese walls
Conflicts of interest are governed by the professional rules of conduct that apply to all lawyers admitted to the Dutch Bar Association. Lawyers must refrain from representing the interests of more than one party if such interests are in conflict or are likely to conflict. If clients share a common or similar interest, lawyers can represent more than one party. A lawyer who represents parties with conflicting interests is required to withdraw from a case as soon as the conflict arises unless they are capable of immediate resolution. An exception to this rule applies where parties are well-informed by their lawyer or law firm about a (potential) conflict of interest and they have consented to that lawyer or law firm to act for both parties. It is also in this context of mutual consent that firms in practice sometimes act for parties that may have conflicts of interest, but who agree with the firm acting for both clients, subject to using Chinese walls.
ii Money laundering, proceeds of crime and funds related to terrorism
The Dutch Criminal Code prohibits acts of money laundering and is broad in scope. Most intentional acts with reference to assets that are directly or indirectly derived from a criminal act qualify as money laundering. The Dutch Anti-Money Laundering and Anti-Terrorist Financing Act requires lawyers in certain situations to perform client due diligence and to report unusual transactions, including those by clients, to the Financial Intelligence Unit – the Netherlands. The implementation of the Amended Fourth Money Laundering Directive into Dutch legislation has introduced a registration requirement for crypto services providers and an ultimate beneficial owner (UBO) register for legal entities and businesses.22 On 27 September 2020, the UBO register for legal entities was introduced. Ultimately, by 25 March 2022, all legal entities must finalise their UBO registration with the Dutch UBO register, which is held by the Dutch Chamber of Commerce. A second UBO register is expected to be introduced in 2022. Based on this second UBO register, all funds for joint accounts as well as certain trusts must register their UBOs. Enhanced client due diligence will apply in more situations, such as complex transactions. In practice, companies will be required to give increasingly detailed information about themselves and their UBOs to law firms.
iii Data protection
The General Data Protection Regulation (GDPR),23 in effect from 25 May 2018, is the main piece of legislation governing the protection of personal data throughout the EU. The GDPR applies directly in all EU Member States, including the Netherlands. In the Netherlands, it is implemented by the GDPR Implementation Act, which supersedes the Dutch Act on the Protection of Personal Data. The GDPR is similar in some ways to the previous legal framework on data protection, but adds several stricter rules and provides additional powers to supervisory authorities and higher sanctions (up to €20 million or 4 per cent of annual worldwide turnover of an undertaking, whichever is higher).24
The GDPR applies to the processing of personal data, meaning data relating to an identified or identifiable natural person. Processing is a broad term; it refers to the act of performing any operation or group of operations on personal data, including collection, recording, storage, transfer and use.
The processing of personal data is only permissible if based on valid legal grounds and for a clearly defined purpose. There may be a valid legal ground if processing is necessary, for example, to perform a contract, to comply with a legal obligation, or for a controller or a third party to pursue legitimate interests (except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject that require the protection of personal data). Data processing is also permissible if the data subject has consented to using data for a specific purpose. The GDPR sets strict rules for consent, which must be explicit, and valid only if sufficient information is provided to the data subject before granting consent.25 The processing of sensitive data (e.g., regarding health, religion, political affiliation, sexual preference, trade union membership and ethnicity) is in principle prohibited. There are some limited exceptions, such as when processing is necessary to establish, exercise or defend legal claims, or whenever courts act in their judicial capacity.
When it comes to the use of personal data in litigation, it is important to keep in mind who wishes to access what type of data. Consider the following: a company wishes to initiate litigation against an employee who has displayed unlawful behaviour. After deliberating with its lawyer, the company begins gathering evidence on the unlawful behaviour by reviewing the employee's emails. The gathering of such evidence is the processing of personal data. In this case, the data can generally be processed based on the legitimate interests of the company.26 It is hardly ever based on consent, as this might not be appropriate or given and, moreover, employee consent is generally not considered freely given because there is a relationship of authority. When processing data, the processing methods must be proportionate to the purposes of the gathering of evidence, and the least privacy-invasive methods must be used.
When evidence containing personal data is used for purposes of establishing facts in the context of a dispute, the client possessing such data is generally responsible for the processing of personal data (the data controller). If lawyers gather evidence for a company, they are likely to be considered as separate controllers, independent from the company.27 The GDPR introduces various requirements on how to maintain internal data processing records. In practice, this means law firms that use personal data have to maintain and update records on processing activities, just as their clients will have to do. In court proceedings, the court may grant a request for disclosure of evidence that contains personal data. A request for access to personal data may be admissible based on the parties' legitimate interests.28 If processing or giving access to the information in litigation involves transfers of personal data to countries outside the European Economic Area (EEA), this is only allowed under specific circumstances. The GDPR generally prohibits transfers of personal data to recipients located in a country that has not been deemed by the European Commission to provide an adequate level of data protection.29 The GDPR provides for an exemption from this rule for litigation purposes. This exemption is available for occasional transfers of personal data necessary for litigation purposes; this means that it cannot be relied on for transfers of personal data for conducting data selection activities. Transferring personal data for such purpose to a non-EEA recipient in a country that has not been deemed to provide an adequate level of data protection entails additional risks and transaction costs. Companies may use the EC model contract clauses30 for this purpose, but only subject to a prior assessment of whether the law or practice of the third country may impinge on the effectiveness of such contract clauses.31 If the law or practice impacts the effectiveness of the clauses, the company must adopt supplementary measures or refrain from transferring personal data.32 The European Court of Justice's judgment in Schrems II demonstrated that supplementary measures are mandatory for all systematic transfers of personal data from the EEA to the United States.
Documents and the protection of privilege
Lawyers admitted to the Dutch Bar (as well as civil law notaries) have legal privilege, which means they have the right to refuse to give testimony to a judge or to provide information that has been entrusted to them by a client in their professional capacity. Under Dutch law, it is the lawyer who holds the privilege, not the client. This means that the lawyer can invoke the privilege, even if the client wants to waive it. Clients do have the right to object to any disclosure of privileged communication with their lawyer. The lawyer, having a duty of confidentiality, cannot waive the privilege without the client's consent. Case law has extended derived legal privilege to the staff of lawyers or law firms, or those instructed by them in the course of providing legal assistance.
In-house legal counsel do not have legal privilege unless they are lawyers admitted to the Dutch Bar. Dutch lawyers can retain their registration as a lawyer with the Bar if they are employed as in-house legal counsel. The European Court of Justice confirmed in its Akzo ruling of 14 September 2010 that communications between a company and its in-house lawyer are not protected by professional legal privilege in EU competition investigations. In 2012, the Supreme Court ruled that – apart from in EU competition investigations – in-house lawyers do have legal privilege. The Court held that in view of Dutch practice and the safeguards applicable to the professional practice of Dutch in-house lawyers by the Dutch Bar regulations, an in-house lawyer cannot be denied professional legal privilege solely because he or she is employed by the company.33
ii Production of documents
Dutch law provides for certain disclosure obligations, although general discovery of documents is not part of the legal framework. In fact, the legislature's wish is not to entertain anything akin to US-style discovery. Article 843a DCCP provides that a party with a legitimate interest may request that another party grant access to or a copy of specific records relating to a legal relationship to which the applicant or its predecessor is a party. A legal relationship can be a contract, but it can also be an actual or alleged tort. Disclosure can be requested from the opposing party, but it can also be requested from a third party, including parties related to the opposing party. The party requesting disclosure must state a direct and concrete interest by indicating to what extent the requested documents can support its legal position or claim (or claims). Parties can only request specific records, which prevents them from being able to engage in fishing expeditions: the records must be specified sufficiently to determine whether a legitimate interest exists in those specific records. The request may pertain to information stored on any sort of device, including electronic devices or cloud storage. Some courts find it sufficient if a party identifies a specific category of documents (e.g., 'all correspondence between parties A and B pertaining to topic X in the years Y through Z'). A request can be made in separate summary proceedings or as a motion in ongoing litigation. If the request meets the criteria of Article 843a DCCP, it can be denied only on limited grounds, such as the existence of a duty of confidentiality relating to the requested documents, or for certain compelling reasons that outweigh the interests of the requesting party.34 Prior to a discovery request, and on the basis of the same criteria set out in Article 843a DCCP, a pre-judgment attachment can be levied to prevent the disappearance or destruction of evidence.35
Courts also have wide-ranging means to order the disclosure of evidence. In civil proceedings, a court can order a party to submit all documents that the court deems relevant to a case. A party can only refuse this order for compelling reasons. The court will decide whether those reasons are justified and, if the court decides that those reasons are unjustified, it may draw any conclusion from the refusal as it deems fit. However, courts generally do not use their wide-ranging powers to order the disclosure of evidence, and rules allowing the court to order evidence do not confer on a party the right to demand that the court use such powers (save for a request based on Article 843a DCCP).
A more specific rule applies to the books and records that a party is required to keep in accordance with the law (such as a company's accounts). A court may order, at the request of a party or ex officio, that a party submit its books and records. If the party refuses to do so, the court may again draw conclusions from this refusal as it deems fit.
Alternatives to litigation
i Overview of alternatives to litigation
In the Netherlands, the most frequently used forms of alternative dispute resolution are arbitration, mediation and binding advice.
The Dutch Arbitration Act (incorporated in Articles 1022 to 1077 DCCP) is modelled on the UNCITRAL Model Law. The provisions of the Arbitration Act are mostly of an optional nature. The legislature has explicitly stressed, time and again, the importance of party autonomy in arbitration.
The most well-known arbitration institution in the Netherlands is the Netherlands Arbitration Institute (NAI). The NAI administers both national and international arbitral proceedings in a wide range of fields. In addition, there are several specialised arbitration institutions.
International arbitrations with a seat of arbitration in the Netherlands are mostly conducted under the arbitration rules of the ICC, UNCITRAL or the NAI. The Permanent Court of Arbitration, with its seat in the Peace Palace in The Hague, administers several arbitrations each year both in public international law and commercial arbitrations.
The general legal climate in the Netherlands is characterised as arbitration-friendly, and benefits from the consistent support of the government. In addition, the Supreme Court is reluctant to approve or condone intervention in arbitral proceedings and awards. Recourse against a final arbitral award is only possible in proceedings to set aside an arbitral award or to revoke an award. To increase the efficient and timely resolution of a dispute, the proceedings for the setting aside and enforcement of arbitral awards are limited to one fact-finding instance: the Court of Appeal (and subsequently only subject to Supreme Court appeal, which by its nature is limited to errors of law).
Parties to an arbitration agreement may obtain interim relief from the arbitral tribunal on the merits if it has already been constituted, or from a separate arbitral tribunal (e.g., by selecting arbitration rules that provide for such a separate tribunal, such as the ICC Arbitration Rules or the NAI Arbitration Rules). Interim measures can also be obtained through state court proceedings if a requested measure cannot be obtained in arbitration, or at least not fast enough. Pre-judgment attachments of assets can only be granted by the state court.
A request to set aside an arbitral award must be made within three months after the award was sent, or within three months after leave for enforcement has been served on the award debtor. An arbitral award can only be set aside on a limited number of grounds. The Supreme Court has, time and again, ruled that the courts should act with restraint in setting aside arbitral awards. It has explicitly held that proceedings to set aside an award may not be used as an appeal in disguise and that the public interest in the effectiveness of arbitration requires that a court only sets aside an arbitral award in clear-cut cases. Grounds for setting aside are:
- there was no valid arbitration agreement;
- the arbitral tribunal was constituted in violation of the applicable rules;
- the arbitral tribunal has not complied with its mandate;
- the award is not signed or does not contain any reasoning whatsoever; or
- the award, or the manner in which it was made, violates public policy.
The court may, at the request of a party or of its own motion, suspend the setting aside proceedings to enable the arbitral tribunal to reverse the ground for setting aside. An arbitral award only becomes enforceable after a leave for enforcement is granted. The Netherlands is party to the UNCITRAL Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). An arbitral award rendered in a foreign country that is part of the New York Convention must be recognised and enforced in the Netherlands unless one of the exceptions found in Article V of the New York Convention applies. If there is no applicable treaty concerning recognition and enforcement of the award, the award made in a foreign state may be enforced in the Netherlands based on the DCCP, which contains similar grounds for refusal to grant leave for enforcement as the New York Convention.
Mediation is well established as one of the standard forms of alternative dispute resolution in the Netherlands. Dutch law has no statutory provisions requiring parties to mediate or determining how mediations must be conducted. Because of its confidential nature, there is limited public information available about mediation in high-stake disputes. A recent example of the successful use of mediation in a major corporate dispute is the Fortis class action settlement, in which an agreement was reached through the use of mediation.
In keeping with its voluntary nature, there are very few mandatory rules that apply to mediations conducted in the Netherlands. In business mediation, parties often prefer not to have to negotiate mediation terms on an ad hoc basis and therefore opt for a set of predetermined rules, such as the mediation rules of the ICC, the Netherlands Arbitration Institute or the Netherlands Mediation Institute.
Directive 2008/52/EC of 21 May 2008 on certain aspects of mediation in civil and commercial matters, which applies to cross-border disputes within the EU, was implemented into Dutch law almost verbatim and is restricted to EU cross-border mediations. Parties to an EU cross-border mediation can request the court to make the content of a written agreement resulting from mediation enforceable. Since there is no Dutch statutory rule compelling mediators and parties involved in a mediation to maintain confidentiality, it is important that parties explicitly agree on confidentiality. To promote mediation, Dutch substantive law provides that a mediation interrupts a limitation period.
iv Other forms of alternative dispute resolution
Parties can agree to solve their dispute by a decision given by one or more third parties appointed as binding advisers. The advice rendered is considered to be an agreement between the parties. Consequently, a party failing to comply with that advice is in breach of contract. In view of its aim of providing certainty and finality, an agreement on binding advice can be vacated only on limited grounds (such as mistake, undue influence, duress or misrepresentation). A binding advice agreement does not preclude the possibility of requesting relief in summary proceedings. Except for general due process and contractual requirements, there are no specific procedural rules concerning binding advice.
The Financial Services Complaints Tribunal (Kifid) is the most well-known institute that resolves disputes based on binding advice and has been explicitly recognised by the Minister of Finance for that purpose. Consumers who are dissatisfied with the services of a bank, insurer or other financial institution can turn to Kifid to have their claim resolved. The Act on Financial Supervision requires financial institutions to submit to dispute resolution by Kifid.
Outlook and conclusions
The past few years have brought some innovations, mainly arising from the covid-19 pandemic. Judges, parties and their legal advisers were forced to be flexible and creative, resulting in the widespread use of digital communication and (partial) video hearings. Even after the covid-19 pandemic has subsided, videoconferencing for court hearings may be used much more frequently (e.g., for witness hearings, attendance of parties abroad, full access for the public via video streaming) in view of the benefits experienced with these tools and the practice courts have developed with holding such hearings.
The Act on Court Confirmation of Extrajudicial Restructuring Plans (CERP) entered into force on 1 January 2021. The CERP introduces the 'Dutch Scheme': pre-insolvency proceedings that create a fast and flexible restructuring procedure in the Netherlands. The CERP introduces a framework that allows a debtor, one or more of its creditors or shareholders, or an employees' representative to offer an extrajudicial restructuring plan to all or some of its creditors outside formal proceedings. The plan may include all or some of the company's debt or share capital. Creditors and shareholders can be placed in different classes under the restructuring plan. Upon satisfying certain approval requirements, the plan may be submitted for court confirmation. Approval requires a favourable vote of two-thirds of the value of the votes cast in a certain class. If the court confirms the plan, it is binding on all affected parties (a cramdown mechanism). The Dutch Scheme provides a high degree of freedom and flexibility to all parties involved due to the wide range of possibilities to restructure the debt and minimal court involvement. It possesses features of the UK scheme of arrangement, and the Chapter 11 procedure in the United States, and complies with the EU Restructuring Directive.36 This Act is expected to lead to more litigation in restructuring matters. Especially due to the financial predicament of many companies as a result of the covid-19 pandemic, this Act could be invaluable. Companies at risk of falling into bankruptcy because of a heavy debt burden will find it easier to continue carrying out their business activities and avoid being declared bankrupt when their business is still viable.
A legislative act for modernising and simplifying the rules of evidence in civil proceedings, proposed by the government on 17 June 2020, is currently still pending before parliament. The goal of the act is to expand the options for gathering and disclosing relevant information and evidence before and during proceedings. Response to the proposal has been mixed. Many critics point out that judges are already equipped with sufficient instruments to assess the consequences of non-compliance, and with the duties to tell the truth and to substantiate a claim, while some also warn of the negative expensive consequences of pretrial discovery. The bill was on hold during the lengthy formation of a new government.
Finally, the Netherlands continues to be an attractive jurisdiction for starting collective actions. More collective actions are to be expected wherein claimants will seek to take full advantage of the possibilities of the new WAMCA regime to claim damages. This development has already been reflected in the increasing number of collective actions that are being filed in the Netherlands, especially in the fields of consumer, data protection and competition law. Also in the field of climate litigation, more cases are expected to be brought before the courts on the question whether public entities as well as private companies are fulfilling their environmental commitments. Businesses that may be affected by proceedings include oil and gas companies, energy companies, aviation companies, financial institutions and pension funds. The proceedings will focus first and foremost on CO2 emissions. However, information and reporting obligations on the financial risks of companies due to climate change and the investment decisions of financial institutions and pension funds could also become the subject of review. In the years to come, climate change will increasingly affect not only everyday life, but also procedures in collective actions.
1Eelco Meerdink is a partner at De Brauw Blackstone Westbroek.
2Regulation (EU) No. 655/2014 of the European Parliament and of the Council of 15 May 2014 establishing a European account preservation order procedure to facilitate cross-border debt recovery in civil and commercial matters.
3Dutch Supreme Court 20 December 2019, ECLI:NL:HR:2019:2006 (Urgenda).
4The Hague District Court 26 May 2021, ECLI:NL:RBDHA:2021:5339 (Milieudefensie/Shell). Please note that the judgment is under appeal.
5Article 3:305a DCC.
6Articles 7:907-7:910 DCC and Articles 1013-1018a DCCP.
7Bulletin of Acts and Decrees 1994, 269.
8Bulletin of Acts and Decrees 2019, 447.
9Rotterdam District Court 19 September 2018, ECLI:NL:RBROT:2018:7852 (Petrobras) and Amsterdam District Court 26 September 2018, ECLI:NL:RBAMS:2018:6840 (Steinhoff).
10Amsterdam District Court 14 July 2021, ECLI:NL:RBAMS:2021:3617 (Car Claim); Amsterdam District Court 9 December 2020, ECLI:NL:RBAMS:2020:6122 (LIBOR); Amsterdam District Court 30 June 2021, ECLI:NL:RBAMS:2021:3307 (Facebook).
11Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers, OJ L 409, 4 December 2020.
12Amsterdam Court of Appeal 29 May 2006, ECLI:NL:GHAMS:2009:BI5744 (Shell); Amsterdam Court of Appeal 12 November 2010, ECLI:NL:GHAMS:2010:BO3908 and 17 January 2012 ECLI:NL:GHAMS:2012:BV1026 (Converium); Amsterdam Court of Appeal 13 July 2018, ECLI:NL:GHAMS:2018:2422 (Ageas).
13Regulation (EC) No. 1393/2007 of 13 November 2007 on the Service in the Member States of Judicial and Extrajudicial Documents in Civil or Commercial Matters.
14The Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.
15Regulation (EU) No. 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast).
16Supreme Court 26 September 2014, ECLI:NL:HR:2014:2838 (Gazprombank).
17For instance, the Amsterdam Court of Appeal refused recognition of the Russian judgment in which Yukos Oil Company was declared bankrupt (Amsterdam Court of Appeal 9 May 2017, ECLI:NL:GHAMS:2017:1695, confirmed by the Supreme Court in its decision of 18 January 2019, ECLI:NL:HR:2019:54. The Court found that the Russian authorities did not levy and enforce tax claims in an orderly and legitimate manner, but rather unlawfully aimed to bankrupt Yukos Oil Company. The Court ruled that the Russian authorities' actions were both procedurally and substantively contrary to Dutch public policy, and therefore refused recognition of the bankruptcy judgment. Two other Russian court judgments surrounding the bankruptcy of Yukos Oil were also denied recognition as those decisions were not reached in independent procedures covered by adequate safeguards (Amsterdam District Court 5 December 2018, ECLI:NL:RBAMS:2018:8618 and ECLI:NL:RBAMS:2018:8653, confirmed by the Amsterdam Court of Appeal). Similarly, the Amsterdam Court of Appeal ruled that an Albanian court judgment was substantively arbitrary and manifestly unreasonable and therefore could not be recognised in the Netherlands, as this would violate Dutch public order (Amsterdam Court of Appeal 17 July 2018, ECLI:NL:GHAMS:2018:3008).
18Regulation (EC) No. 1206/2001 of 28 May 2001 on Cooperation between the Courts of the Member States in the Taking of Evidence in Civil or Commercial Matters.
19The Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters.
21Amsterdam Court of Appeal 17 January 2012, ECLI:NL:GHAMS:2012:BV1026 (Converium).
22Directive (EU) No. 2018/843 of 30 May 2018 amending Directive (EU) No. 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and amending Directives 2009/138/EC and 2013/36/EU.
23Regulation (EU) No. 2016/679 of 27 April 2016 on the protection of natural persons regarding the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC.
24Rules of the GDPR that are not discussed here, but that may also be relevant for data processing in the context of dispute resolution, include rules regarding the information to be provided by the controller to the data subject (Articles 13 and 14), rights of the data subject to access (Article 15), rectification (Article 16), erasure (Article 17), restriction of processing (Article 18), data portability (Article 20), objection to processing of personal data (Article 21), actions to be taken in the case of data breaches (Article 33ff) and the appointment and duties of data protection officers (Article 37ff).
25As consent should be sufficiently specific, freely given, based on information and must be able to be revoked at any time, it is generally not advisable to base processing on consent (solely).
26Legitimate interests can include alleged wrongdoing by an employee, preparation for litigation or compliance with foreign legal obligations.
27The Netherlands Bar, Necessary and Relevant Elements of a Privacy Statement of a Law Firm (in Dutch), https://www.advocatenorde.nl/document/handreiking-elementen-privacy-statement, European Data Protection Board, Guidelines 07/2020 on the concepts of controller and processor in the GDPR, Version 1.0, 2 September 2020, p. 12.
28According to Article 843a DCCP a party can request (access to) certain documents to prepare for litigation. In the case Den Bosch Court of Appeal, 14 October 2013, ECLI:NL:GHSHE:2003:AM7927 it was decided that a request for documents containing personal data under Article 843a DCCP should be judged as a request to process data under the then-prevailing Act on the Protection of Personal Data (similar reasoning would apply under the GDPR). The court ruled that such a request can be complied with based on legitimate interests of that party, namely the finding of the truth, which were not outweighed by the privacy interest of the data subjects.
29Countries that have been deemed by the European Commission to provide an adequate level of data protection include Andorra, Argentina, Canada, Faroe Islands, Guernsey, Israel, the Isle of Man, Japan, Jersey, New Zealand, Switzerland, the United Kingdom and Uruguay. The European Commission's Privacy Shield as agreed with the United States was, however, invalidated by the European Court of Justice judgment of 16 July 2020, C-311/18, ECLI:EU:C:2020:559 (Schrems II).
30EC model contract clauses currently in force can be found at https://ec.europa.eu/info/law/law-topic/data-protection/international-dimension-data-protection/standard-contractual-clauses-scc_en.
31CJEU (Schrems II), European Data Protection Board, Recommendations 01/2020 on measures that supplement transfer tools to ensure compliance with the EU level of protection of personal data, 18 June 2021, pp. 14–21.
32ibid., pp. 21–23.
33Supreme Court 15 March 2013, ECLI:NL:HR:2013:BY6101.
34For instance, because records encompass confidential personal or corporate material, or medical, financial or national security information.
35Supreme Court 13 September 2013, ECLI:NL:HR:2013:BZ9958.
36Directive (EU) No. 2019/1023 of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) No. 2017/1132.